Hi everyone and welcome to the Yellow Tunnel community, an aggressive short-term trading service dedicated to all classes of traders seeking to elevate their trading skills, market awareness and trading profits.
Bullish rotation into value stocks is helping to support the market as the data on COVID-19 is showing signs of the spread beginning to slow. If this trend continues to improve, then there will be some very aggressive rotation into the value and cyclical stocks that will be stunning.
At the same time, tensions with China are rising and there is a stalemate in Congress about advancing the stimulus bill to passage over some deep divisions on several parts of the bill.
All this translates to – expect more volatility in the days ahead.
NEW WEEKLY POWER TRADER SERVICE
We recently launched our new Weekly Power Trader service that we at Yellow Tunnel are very excited about. Each week on Sunday, our expert traders use our AI Tools to provide the Top Bullish and Bearish Stocks, each with an Entry Price, Target Profit, and Stop Loss.
Also, note that the Weekly Power Trader signals are meant to last for 5-10 days as long as the vector confirms the same direction as the original pick, for stocks we use a target gain of 2% and stop as 2% of the stock price.
Signals have averaged over 75% accuracy in my live trading since inception. Sometimes we hold position 2-5 days by using options (selling OTM BULLISH PUT spread) and targeting 1% target gain and 1% stop loss using stock price. Green color should be interpreted as a bullish signal and Red color as a bearish signal.
CURRENT TRADING LANDSCAPE
Everyone in our neighborhood is at each other’s throats. As I said before, COVID-19 seemed to bring out the worst in people. I cannot even go for a run anymore without running into one of the neighbors with an opinion and a reflection.
I feel like I am living in an episode of Desperate Housewives and, no, I did not watch the show, not really. The new subject that is currently being discussed is the reopening of the schools. Everyone has an opinion, which is ok, but no one wants to hear anyone else’s opinion.
It’s like we have suddenly become a society where our opinion is actually not an opinion at all, but a fact and everyone else’s position is fake news. I am just glad that I only encounter these people while I am running and most of the time, they feel bad interrupting my exercise routine, so they let me be. But my wife, on the other hand, is in the midst of this “pandemic” without an end in sight.
Value stocks (Metals, Energy and Industrial) outperformed the growth stocks this Friday after leading the prior week, but still remain attractive relative to a very crowded trade in the big-cap tech sector.
If the SPY can trade above $327 level next week, then market will continue its march toward the 52-week high. If the SPY break below $319 level this week, the SPY will trade in the range between $300 and $323 for the next few month.
My opinion has not changed. The short-term bottom is at $300 and potentially can be retested most likely in August (put/call ratio is at the lowest point this year). SPY longer-term overhead resistance is at $340 and can be retested in the next 2-4 weeks. I would be a buyer using any short-term corrections but would not chase the stock market at these levels.
"BUY" signal based on the Aggressive Power Trader Portfolio for Monday is at $332 level using SPY and "SELL" signal is at $336 for short term traders.
I expect the market volatility and the two percent daily market moves to persist. SPY top is set at $340 and market can potentially retest all-time high level in the next 2-4 weeks. The market can overshoot support and resistance levels when VIX is elevated. My strategy is to buy 5-10% market corrections.
Based on our models, the market (SPY) will trade in the range between $300 and $340 for the next 4 weeks.
Bond yields sank to historic lows this past week with the dollar weaker as Congress mulls a multi-trillion deal. There is also fresh optimism surrounding a more robust economy shaping up for the third quarter that bodes well for iron ore and copper demand. With prices of gold, silver, copper and most all other base metals trading solidly higher, the sector as a whole presents a very attractive trading proposition.
The SPDR S&P Metals & Mining (XME) is an excellent way to trade the sector with a nice mix of steelmakers , gold/silver and copper miners occupying the top ten spots that account for 48.78% of total assets.
A one-year chart of XME shows a solid upside breakout this past week where a retest of the 200-day moving average would imply a sweet entry point to begin trading the new uptrend for the stock and related bullish options strategies.
My Tradespoon Season Chart also gives XME a bullish outlook with a similar take on letting the stock consolidate following a large pop recently and then buying the dip when my AI indicators tell us to sometime over the balance of August.
I’ll be looking to utilize this bullish scenario for our Weekly Power Trader members with short-term trading strategies in the days ahead. This anticipated momentum for the metals and mining stocks will provide several high-probability opportunities for our Weekly Power Trader advisory service.
TRADE OF THE WEEK
Of the top holdings within XME, Freeport-McMoran Inc. (FCX) stands out as a favorite stock to trade from the long side for a few good reasons. First, it is wonderfully liquid in both the stock and options with very tight spreads. Second, it tends to outperform its peers when making a directional move and, thirdly, institutions and hedge funds love to trade this name, so there is plenty of pin action to trade the stock aggressively.
Form the chart of FCX below, the stock had a great week on the upside, gapping up to the high $14 area on a big spike in volume. Here too, similar to XME, the stock will do some back and filling whereby an attractive entry point will come into play.
Our AI-driven stock forecast Toolbox gives FCX an “A” Model Grade rating with predicted price resistance up at $17 over the near term. This provides and excellent window of profit potential if traded right.
Our Weekly Power Trader advisory service takes positions in only blue-chip stocks and ETFs that are “green lighted” by my proprietary AI tools, and when confirmed, are added to the portfolio with my investment capital invested in each and every trade.
Trading Thoughts: consider buying near the "BUY" level with a "10 days prediction" higher than the close price. In our live trading room. I usually hold a position for 1-2 days and allocate no more than 5% of trading capital to any single trade.
I allocate less than 5% of my portfolio if I hold a position overnight. On average, less than 1% of the portfolio should be at risk if you hold a position less than one day. I personally look to enter a position at predicted LOW (BUY) price or yesterday's close price. For Weekly Power Trader, my stop loss for stocks is 2% and my target gain is 2%.. I target 75% accuracy using these signals.
Through the Weekly Power Trader service, we tie our Tradespoon Live Trading Room to manage the parameters of every trade. And we update our closed positions daily. The two platforms work seamlessly to provide our subscribers with the most robust trading experience available anywhere in the market today.
For those that have followed since inception, a $100,000 initial investment when backtested may have grown to over $1.7 million dollars. This stellar performance is made possible by being right on over 75% of all trades with an average profit of 24.80% per trade. This kind of performance stands alone among all other trading services.